Used-car bargains found on luxury portion of lot

May 15, 2003|By Karen Lundegaard, The Wall Street Journal.

Looking for a luxury car bargain? Try the used-car lot.

For the last year, used-car prices have been falling drastically. But until recently, the drops were largely confined to mainstream cars, vans and sport-utility vehicles. Now, the discounting is hitting used luxury cars.

A 2001 Saab 9-5 is selling for an average of $23,751, down 23 percent from a year earlier, according to Edmunds.com, which tracks used-car prices. While prices of particular model years fall from year to year, that's a much bigger-than-normal drop.

It's a similar story for the more luxurious Jaguar XKR. A 2000 model of that car with its 390-horsepower, 8-cylinder engine has seen a 19 percent price decline in the last year. It now sells for about $49,500, Edmunds says. To put those deals in perspective, a new Saab 9-5 goes for around $35,000, and a new Jaguar XKR costs about $82,000.

These big declines are being fueled by the barrage of rebates, financing deals and subsidized leases in the new-car market. When manufacturers offer deals on new cars, that undecuts the price of used cars. Because domestic cars have done the heaviest discounting, including plenty of zero-percent financing, domestic makes were hit first.

Luxury makes have discounted mainly through subsidized leases, part of the reason their used-car prices weren't hit as hard initially. But now a wide variety of makers are advertising $299-a-month leases for new cars such as the Audi A4 or the BMW 325i, and that is pulling down used-car prices.

Overall, the prices of used luxury cars is falling faster than those of other used vehicles. The selling price of a 2000 luxury vehicle fell 17 percent in March 2003 from a year earlier, compared with a 14.7 percent drop for the used-vehicle market, according to Edmunds. The average luxury car sold at auction in March for $15,791, near its lowest price in almost five years, says Atlanta-based Manheim Auctions, the largest used-car auction company.